WHAT WENT WRONG WITH GLENZEIL?
Written on the 12 September 2014 by Nick Nichols
THE collapse this week of one of the Gold Coast’s largest builders, Glenzeil, has rocked the confidence of the city’s construction sector despite a surge in home approvals across the region over the past year.
Industry observers say lean margins are placing undue pressure on builders who are battling higher costs and, in some cases, a shortage of materials due to booming property markets in Sydney and Melbourne.
Gold Coast Business News was first to reveal that Glenzeil was placed into liquidation on Monday, leaving the construction sector reeling and sub-contractors out of pocket at a time when the local industry was on the path to recovery.
Liquidator Peter Dinoris, of Vincents Chartered Accountants, could not reveal how much creditors were owed or give reasons why Glenzeil closed its doors on Monday after more than two decades in business.
Construction law expert Crystal Ray, of McKays Solicitors, says her phone has been “ringing off the hook” from sub-contractrors seeking legal recourse to recover payments for work completed.
“The phone’s been hot with specialist trades contractors like plumbers, electrical mechanical and fire services contractors, who are usually the ones most burnt when a builder fails, asking how they can get paid for the work they’ve done on Glenzeil projects such as the almost completed $35 million Pure Kirra project,” Ray says.
Pure Kirra, being developed by the Pikos Group, and the $35 million Plaza Apartments in South Brisbane for David Devine’s Metro Properties, were the biggest projects on Glenzeil’s books at the time of liquidation.
John Duncalfe, the regional manager of Master Builders Gold Coast, says the Glenzeil collapse came as a complete shock to the industry which has been on the mend for the past 18 months.
“No one saw this coming - these guys were good operators,” Duncalfe says.
“I am deeply concerned for the subbies. I can understand how they feel because they always feel as though they are last on the line.
“I don’t know what can be done, other than lodging sub-contractors charges claim, although some of the bigger guys will have insurance.”
Duncalfe says the construction industry on the Gold Coast continues to walk a fine line, despite building approval figures showing a 74 per cent gain over the past year.
He says most of this growth has come from the residential housing sector, while commercial construction has yet to “really kick off”.
“There’s a lot of promise, but I am concerned that people are putting in development applications to add value to their properties and that they may not be planning to proceed with the work.
“The thing that will bring back our industry is consumer confidence and clearly that is already happening. Projects are ready to go but the button hasn’t been pushed on them.”
Duncalfe says low margins also are taking their toll across the sector as builders compete for the jobs that come to market on the Gold Coast.
“A lot of guys go into these projects with low margins to win them,” he says.
“That is a concern because if there are any hiccups along the way, you don’t recover from them.
“There also are added costs as projects proceed. The costs of materials and labour go up and, if that happens, sometimes those costs have to be absorbed.”
Duncalfe says he is even hearing reports that materials are hard to find which adds to cost blowouts.
“With a lot of commercial jobs, there’s no room for error.”
Full reasons for Glenzeil’s collapse have yet to emerge, with creditors awaiting a report from the liquidator.
Duncalfe says despite the problems at Glenzeil, he remains confident in the Gold Coast construction sector due to a number of major projects already in train, including the Pacific Fair redevelopment, the Jupiters Casino refurbishment and the Commonwealth Games Village development.
He says many construction companies have taken on board the lessons of the past and are operating on more conservative footings than they were five years ago.
However, Duncalfe does concede it’s hard not to be shaken by the loss of a company the size of Glenzeil.
Read the breaking story about Glenzeil's collapse here.
Author: Nick Nichols